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Is this round of fundraising by Hynix and Micron a good thing?
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Both Hynix and Micron are seeking to raise capital. Hynix got the green light from its former creditor banks to raise approximately US$519 million, while Micron is hoping to gain US$450 million by offering stock and convertible senior notes. Both companies have burnt through billions in the last few years while spending on new capacity and filling the hole in accounts as losses continued unabated.
The lack of capital from the markets has already brought several memory manufacturers to their knees and seen many cut production or stop altogether. All good when you consider the massive oversupply problems that have existed for more than two years.
On the back of these developments we have seen memory IC ASPs starting to rise and we could see shortages in the peak buying third quarter. All good stuff as many memory producers should generate good levels of operating cash, which is desperately needed.
Perhaps it is the timing of these cash calls that is disconcerting! The hoped for recovery hasn’t really started yet and end demand for the third quarter simply isn’t known. There is a possibility that capacity comes back on stream in the second quarter that keeps prices depressed and red ink on the spread sheets.
Both Hynix and Micron have cash, not much but some, with Micron a little better-off than Hynix. That said both need to continue node migrations to remain cost competitive and that may be fuelling the need for extra funds. Hopefully it’s not for new capacity, though these figures wouldn’t buy much of that anyway.
Maybe it is actually a good thing as this could indicate that investors and banks are starting to believe executives that the worst is now behind them and this wave of new funding is for remaining healthy enough to capitalise better when ASPs go back to and beyond manufacturing cost levels.
IMHO, Micron is probably trying to build a war chest for cheap capacity buying opportunities as ProMOS, Qimonda and Spansion have 300mm fabs. Hynix probably needs to fill more holes in its spread sheet.
With ASPs still below cost levels it’s definitely a time to still hold your breath rather than give a sigh of relief at these funding rounds.